Introduction to relationship marketing strategy

Relationship marketing - Wikipedia

introduction to relationship marketing strategy

Relationship marketing was first defined as a form of marketing developed from direct response .. Referral marketing is developing and implementing a marketing plan to stimulate "What is relationship marketing? definition and meaning". Every human interaction and transaction is built around relationships. Relationship Marketing has evolved as a marketing strategy as well as the foundation on. Relationship Marketing aims to create long term customers who provide the firm with ongoing business. Introduction Relationship marketing involves the organisation implementing strategy to attract and retain customers.

Networks of relationships is the fundamental design of the human society. No wonder that this fundamental fact has been recognized and explored by all the businesses where in they have been building business strategies around the customer and strive to build a relationship with every Customer. Relationship Marketing therefore has evolved not only as a marketing strategy but has been the foundation on which the Companies build their core values and ethics.

Relationship Marketing defines the framework for the Company to reach out as well as and orient themselves to the outside markets, to the end customer as well as to the business partners, the suppliers and vendors too.

Relationship marketing is not limited to Customers and Suppliers alone but has been extended in scope to cover he internal employees as well as an effective way of reaching out to attracting best talent too. The advertisements are designed to strike a cord amongst the readers that prompts one to apply for the job. In the high tech age where the marketing concepts and tools have undergone major changes with the introduction of e commerce, online selling, network marketing, direct marketing, B2B and B2C business models, relationship marketing has become the base on which the Business strategies as well as Marketing strategies are built.

Relationship Marketing

Business Organizations today have begun to recognize and consider the human quotient as well as the emotional quotient of business relationships. Relationship Marketing has evolved as a discipline that helps the Businesses to look beyond transactions to long term business associations. Successful Relationship Marketing strategy helps the Organization deepen and strengthen its revenue streams on long term basis. Relationship Marketing is a considered to be a core Corporate Philosophy on which the Business strategy is built upon.

This approach tries to transcend the post purchase-exchange process with a customer to make richer contact by providing a more personalised purchase, and uses the experience to create stronger ties. Relationship marketing is different from other marketing techniques as it mainly focuses on long term relationship with customers. Relationship marketing first appeared in the s and was proposed by American marketing scholars Berry and Jackson Berry argued in a conference on the field of service marketing that relationship marketing is a marketing activity for enterprises to obtain, maintain and promote effective relationships with customers.

introduction to relationship marketing strategy

At the same time, after a long term follow-up study on the marketing process of the service industry, it is concluded that the ultimate goal of enterprise marketing should not only develop new customers, but also pay attention to the maintenance of existing customers, and improve the long term interests of both parties through good cooperative relations. Then the content of relationship marketing is given.

Introduction to Relationship Marketing

It also argues that the cost of maintaining an old customer is far lower than the cost of developing a new customer, and that the marketing concept of maintaining the relationship with old consumers is more economical than the marketing concept of developing new customers.

This research conclusion has been generally recognized later, but the research scope is only limited to the relationship with old customers, which is easy to ignore the dynamic development of customers, because the formation of customer loyalty customers are from the development of new customers, so we should pay attention to the development of new customers. If the enterprise is limited to the maintenance of existing customers, then it is impossible for the enterprise to achieve any progress and cannot cope with the current market competition.

From a social anthropological perspective, relationship marketing theory and practice can be interpreted as commodity exchange that instrumentalise features of gift exchange.

This perspective on marketing opens up fertile ground for future research, where marketing theory and practice can benefit from in-depth research of the principles governing gift exchange.

Introduction to Relationship Marketing - Meaning and Important Concepts

According to Liam Alvey, [5] relationship marketing can be applied when there are competitive product alternatives for customers to choose from; and when there is an ongoing desire for the product or service. Relationship marketing revolves around the concept of gaining loyal customers. Research conducted to developing relationship marketing suggests that firms can best do this through having one of the three value strategies; best price, best product, or best service.

Firms can relay their relationship marketing message through value statements. For example, an automobile manufacturer maintaining a database of when and how repeat customers buy their products, the options they choose, the way they finance the purchase etc. In web applications, the consumer shopping profile can be built as the person shops on the website.

This information is then used to compute what can be his or her likely preferences in other categories. These predicted offerings can then be shown to the customer through cross-sell, email recommendation and other channels. Relationship marketing has also migrated back into direct mail, allowing marketers to take advantage of the technological capabilities of digital, toner-based printing presses to produce unique, personalized pieces for each recipient through a technique called " variable data printing ".

Marketers can personalize documents by any information contained in their databases, including name, address, demographics, purchase history, and dozens or even hundreds of other variables.

The result is a printed piece that ideally reflects the individual needs and preferences of each recipient, increasing the relevance of the piece and increasing the response rate.

introduction to relationship marketing strategy

Scope[ edit ] Relationship marketing has also been strongly influenced by reengineering. According to process reengineering theory, organizations should be structured according to complete tasks and processes rather than functions.

That is, cross-functional teams should be responsible for a whole process, from beginning to end, rather than having the work go from one functional department to another. Traditional marketing is said to use the functional or 'silo' department approach. The legacy of this can still be seen in the traditional four P's of the marketing mix.

Pricingproduct managementpromotionand placement. According to Gordonthe marketing mix approach is too limited to provide a usable framework for assessing and developing customer relationships in many industries and should be replaced by the relationship marketing alternative model where the focus is on customers, relationships and interaction over time, rather than markets and products.

In contrast, relationship marketing is cross-functional marketing.

Relationship marketing

It is organized around processes that involve all aspects of the organization. In fact, some commentators prefer to call relationship marketing "relationship management" in recognition of the fact that it involves much more than that which is normally included in marketing. Because of its broad scope, relationship marketing can be effective in many contexts. As well as being relevant to 'for profit' businesses, research indicates that relationship marketing can be useful for organizations in the voluntary sector [7] and also in the public sector.

Satisfaction[ edit ] Relationship marketing relies upon the communication and acquisition of consumer requirements solely from existing customers in a mutually beneficial exchange usually involving permission for contact by the customer through an " opt-in " system. Although groups targeted through relationship marketing may be large, accuracy of communication and overall relevancy to the customer remains higher than that of direct marketing, but has less potential for generating new leads than direct marketing and is limited to Viral marketing for the acquisition of further customers.

Research by John Fleming and Jim Asplund indicates that engaged customers generate 1. According to Buchanan and Gilles, [18] the increased profitability associated with customer retention efforts occurs because of several factors that occur once a relationship has been established with a customer. The cost of acquisition occurs only at the beginning of a relationship, so the longer the relationship, the lower the amortized cost. Account maintenance costs decline as a percentage of total costs or as a percentage of revenue.

Long-term customers tend to be less inclined to switch, and also tend to be less price sensitive. This can result in stable unit sales volume and increases in dollar-sales volume. Long-term customers may initiate free word of mouth promotions and referrals.

Long-term customers are more likely to purchase ancillary products and high margin supplemental products. Customers that stay with you tend to be satisfied with the relationship and are less likely to switch to competitors, making it difficult for competitors to enter the market or gain market share.

Regular customers tend to be less expensive to service because they are familiar with the process, require less "education", and are consistent in their order placement. Increased customer retention and loyalty makes the employees' jobs easier and more satisfying.

In turn, happy employees feed back into better customer satisfaction in a virtuous circle. Relationship marketers speak of the "relationship ladder of customer loyalty ". It groups types of customers according to their level of loyalty.

introduction to relationship marketing strategy

The ladder's first rung consists of "prospects", that is, people that have not purchased yet but are likely to in the future. This is followed by the successive rungs of "customer", "client", "supporter", "advocate", and "partner". The relationship marketer's objective is to "help" customers get as high up the ladder as possible. This usually involves providing more personalized service and providing service quality that exceeds expectations at each step.

Customer retention efforts involve considerations such as the following: Customer valuation — Gordon describes how to value customers and categorize them according to their financial and strategic value so that companies can decide where to invest for deeper relationships and which relationships need to be served differently or even terminated. Customer retention measurement — Dawkins and Reichheld calculated a company's "customer retention rate".